Fast, actionable advice from Founders, CEOs, and Investors

Sam Altman (President at Y Combinator) Fundraising Advice for YC Companies – Y Combinator PosthavenYou should care more about good investors than good valuations. Talk to the founders of the companies that investor has funded (especially in cases when the companies haven’t worked out). You should insist on clean terms (in practice, offering messy terms is a sign of being a bad investor).

Fred Wilson (Co-Founder and Partner at Union Square Ventures) Getting The Deal Done – AVCSometimes you just need to get the deal done. When you are burning through cash and need to finance your company, the terms might suck, but the cash doesn’t. So you do the deal and live to fight another day. Marc and Ben did the right thing at LoudCloud and Jack Dorsey did the right thing at Square. If you believe in your business and yourself, take the money and get back to work. A financing is not an exit. The price matters less than the cash m… (read more)

Fred Wilson (Co-Founder and Partner at Union Square Ventures) Burn Baby Burn – AVCValuations can be fixed. You can do a down round, or three or four flat ones, until you get the price right. But burn rates are exactly that. Burning cash. Losing money. Emphasis on the losing. And they are indeed sky high all over the US startup sector right now. And our portfolio is not immune to it

Paul Graham (Co-Founder & Partner at Y Combinator) How to Raise MoneyOccasionally you’ll encounter investors who describe themselves as “valuation sensitive. ” What this means in practice is that they are compulsive negotiators who will suck up a lot of your time trying to push your price down. You should therefore never approach such investors first

Fred Wilson (Co-Founder and Partner at Union Square Ventures) The Valuation Trap – AVCSo the moral of this story is that you can push valuations when you have investors knocking down your door, but unless you are cash flow positive and expect to remain so for the foreseeable future, you do that at your own risk. You will need to find someone to top that price down the road and that person may not be there.

Fred Wilson (Co-Founder and Partner at Union Square Ventures) My Nightmare – AVCValuation is just a number. It’s the price you pay for your shares. You don’t know if you got a good deal for a while, but eventually you will know. But valuation is also a psychological thing. It says how much you value a person. How much an entrepreneur is valued in the market. And how much an investor is valued in the market. The clearing price reflects both sides of the transaction.

Fred Wilson (Co-Founder and Partner at Union Square Ventures) Valuation vs Ownership – AVCYou might ask “how can taking $2mm for 20% be better than taking $5mm for 20%?” and you’d be right asking that question. The answer is you can get the other $3mm later at an even higher price. That has been the history of many of our investments. We recommend that entrepreneurs keep the funding amounts small in the early rounds when the valuations are lower and then scale up the amounts in the later rounds when it is a lot more clear how money c… (read more)

Fred Wilson (Co-Founder and Partner at Union Square Ventures) What Can It Be Worth? – AVCSo when valuing a venture stage opportunity, you have to imagine the product can scale to be used by many more people, or companies, or both, than are using it now. For that exercise, you need to study the product, the roadmap, and the use cases and be sure that your imagination is possible and not delusional. You also need to figure out what an annual revenue per user (ARPU) might be and apply that to the potential size of the market. Then you n… (read more)

Fred Wilson (Co-Founder and Partner at Union Square Ventures) On Getting An Outside Lead – AVCThere are some “truths” in the venture capital business that I have been hearing since I got into this game in the mid 80s. One of them is that getting “third party validation” by going outside of the current investor syndicate to find a new lead is good for the investors. I have come to believe this “wisdom” is nothing more than lack of conviction on the investor’s part.